Global Bond Rout Persists

 
Snapshot: 

        -Dollar mixed; 10-year Treasury yield at 2.254%; U.S. stock futures slide; Nymex crude at $61.18; gold at $1182.12
        -Watch for: Challenger Job-Cuts, Weekly Export Sales, Weekly Jobless Claims; earnings from Alibaba, CBS, Liberty Global
        News: Global Bond Selloff Spills Over into Asia; German Manufacturing Orders Show Mixed Picture; Treasury Plans More Short-Term Debt
        The euro continued to climb against the dollar Thursday, hitting a two-month high during the Asian session and was recently up close to 0.2% at $1.136.
        Elsewhere in currency markets, the British pound fell around 0.2% to a three-month low against the euro Thursday, as polls opened for one of the most closely fought elections in recent U.K. history. Sterling also edged lower against a weak U.S. dollar.
        Although the pound has shown resilience in the lead-up to the vote, strategists on Thursday said the currency would likely face headwinds over the coming days, especially if no single party is able to secure a majority, which could lead to lengthy negotiations over a possible coalition.
        "If heightened uncertainty weighs more heavily on the pound in the near-term, it could create an attractive opportunity to buy the pound on dips," said Lee Hardman, a strategist at Bank of Tokyo-Mitsubishi UFJ.
        The Indian rupee on Thursday fell to its lowest level against the U.S. dollar since September 2013, as foreign investors sold off their local stock holdings, taking dollars out of the country.
        The rupee was trading at 63.94 against the dollar, compared with Wednesday's closing level of 63.54. It weakened as much as 64 to a dollar during the day's trade, the lowest in 20 months.
        U.S. government bonds extended their losing streak after comments from Janet Yellen Wednesday who predicted a jump in long-term interest rates, fuelled by the continued sharp selloff in European bonds.
        At 5.23am ET, the 10-year Treasury note was yielding 2.254%, a fresh two-month high according to CQG data.
        A rout in European bond prices persisted Thursday, leaving yields to rebound from the record lows they had hit as a result of the European Central Bank's $1.25 trillion bond-buying program it launched in March.
        The widely watched yield on the 10-year German bund was driven up 14 basis points to 0.74%, just two weeks after reaching an all-time low of 0.05%. The yield on the 10-year French bond rose 14 basis points to 1.05%, according to Tradeweb data.
        Wall Street was poised for a deep-red open, with futures tracking a selloff in global equity markets that was driven in part by sharply rising bond yields in Europe.
        Also in focus are fresh jobless claims data and Friday's highly anticipated nonfarm-payrolls report.
        Stocks in Asia closed sharply lower following Federal Reserve Chairwoman's Janet Yellen's warning on stock valuation, while European markets slumped amid weakness in the bond market.
        Mirroring these losses, futures for the Dow Jones Industrial Average slumped 116 points, or 0.7%, to 17,662, while those for the S&P 500 index dropped 12.95 points, or 0.6%, to 2,061.25. Futures for the Nasdaq 100 index lost 31.50 points, or 0.7%, to 4,341.75.
        Oil prices rose in volatile trade in Europe as the latest U.S. supply data suggested the crude oil glut might be starting to abate.
        Brent crude for June delivery rose 0.8% to $68.35 a barrel on London's ICE Futures exchange and was on track for its third consecutive session gain. Light, sweet crude futures for delivery in June on the New York Mercantile Exchange were trading above $60 a barrel for the second consecutive day. The contract was trading at $61.18 a barrel recently, up 0.4% from Wednesday's settlement.
        Spot gold prices were lower in Europe, trading down 0.8% at $1,182.12/oz, as the dollar rises against a range of currencies.
        More broadly, "if equities have a more meaningful sell-off then a general [anti-risk] move could initially drag gold bullion lower, although a secondary reaction could be bullish if investors then look for safe-havens," said William Adams, head of research at Fastmarkets.
        Global Bond Selloff Spills Over into Asia
        A sharp selloff in European and U.S. bond markets is spilling over into Asia, sending the price of government debt tumbling across the region.
        German Manufacturing Orders Show Mixed Picture
        German manufacturing orders rebounded in March, owing to strong domestic demand and solid order flow from other eurozone countries, although it was held back by a collapse in demand from outside the currency bloc.
        IMF Sees Risks for Asia-Pacific
        Rising debts, a stronger dollar and weaker-than-expected performances from China and Japan pose increasing risks to the broader Asia-Pacific region, even as it looks likely to remain the world's fastest-growing, the International Monetary Fund said.
        Treasury Plans More Short-Term Debt
        The U.S. Treasury Department said it plans to increase the supply of short-term debt, in a bid to ease investors" concerns about difficulty trading in global bond markets.
        Australian Rate Cut Falls Flat
        A rate cut by the Reserve Bank of Australia earlier this week hasn't panned out as expected, as bond yields have risen and the Australian dollar gotten stronger, stymying efforts to give a boost to the economy.
        Iranian Authorities Release Maersk Tigris
        Iran's maritime authorities said Thursday they had released the Maersk Tigris, more than a week after the seizure of the cargo ship by Iranian naval vessels raised tensions in the Strait of Hormuz.
        Swiss Consumer Confidence Stagnates
        An index measuring the confidence of Swiss consumers was unchanged in the second quarter, reflecting concern about the strong Swiss franc's impact on the economy.
        Write to paul.larkins@wsj.com
        (END) Dow Jones Newswires

        May 07, 2015 06:29 ET (10:29 GMT)

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